Allocation of costs

Cost Calculation. The main elements determining production cost are identical for fine chemicals and commodities (see Economic evaluation), a breakdown of production cost is given in Table 2. In multipurpose plants, where different fine chemicals occupying the equipment to different extents are produced during the year, a fair allocation of costs is a more difficult task. The allocation of the product-related costs, such as raw material and utiHties, is relatively easy. It is much more difficult to allocate for capital cost, labor, and maintenance. A simplistic approach is to define a daily rent by dividing the total yearly fixed cost of the plant by the number of production days. But that approach penalizes the simple products using only part of the equipment. 

A related problem is the allocation of costs when a raw material for one process operation is produced internally by another process operation of the same organization (17). The transfer or captive price assigned to the raw material can range from the production cost to a market price that reflects a total profit margin for the material producer, depending on the accounting procedures adopted. 

Since a fair allocation of costs requires considerable technical knowledge of operations in the chemical-process industries, a close liaison between the senior process engineers and the accountants in a company is desirable. Indeed, the success of a company depends on a combination of financial, technical, and managerial skills. 

Discuss the alternatives mentioned in last paragraph of Section II1,B regarding allocation of costs of air pollution control in an industrial organization. 

Testing costs are to be borne by the manufacturers and/or processors and if these firms cannot agree on allocation of testing, the EPA can establish the allocation of costs. 

Table 10.4 is a typical example of a cost estimate summary. The suggested allocation of costs to the various accounts is discussed in Section 10.5. 

OTA was unable to obtain much information about the structure of such accounting systems hence, the ability of firms to identify expenditures by clinical phase is unclear. All companies would have an accurate picture of monthly charges to individual project accounts, however, and the dates at which phase I, phase II, and phase III trials began are available to companies, so allocation of costs by date is a reasonable approach to estimating the distribution of costs by phase. If companies responded to survey questions with this approach, the phase-specific estimates would be reasonably accurate. 

Clear regulations that assign the responsibilities for the new investments, the participation of the stakeholders in the process and the allocation of cost to the network users are of essence in this respect. Moreover, policy makers have to deliver more efforts to fight against the NIMBY ( not in my back yard ) syndrome that often obstructs the building of infrastructures that are so important to improve security of supply. 

In chemical companies, the correct allocation of costs required for cleaning up a given production unit to comply with regulations (e.g., the purification of waste gas and wastewater and the di.sposal of waste materials from this unit)... 

The BUA allows allocation of costs for each component for example, in the NGCC case, the GT accounts for 42% of total costs, while the other components account for about 15% each. In the capture case, the share changes because of the additional CO2 capture and compression section. 

An issue that arises in the connection with the costs of functions is that they are sometimes not independent. That is, the cost of providing a certain function may depend on whether another function is already present or not. A typical example is the function of scheduling the replacement of a component subject to wear and with a well-established mean time to failure. The function involves the acquisition of data regarding the operating time of the equipment and then some processing of this data to bring up an item on the maintenance schedule. However, another function, the allocation of cost to the product provided by the equipment, requires access to the same data. In this case, we would be better off to describe the acquisition of the data as a separate function, and then have two functions for the processing of the data, one for each of the two different applications. 

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